Current goes bi-weekly

Following is a news release issued today by the publisher of Current announcing the provocative tabloid will be going bi-weekly.

One of Current's more famous recent covers was the one at left featuring Andy Wells with a ballgag stuffed in his mouth. [Photo: Greg Locke/ballgag: Our Pleasure]

Current is distributed free of charge in the metro St. John's area. There are no plans to change that.

Current celebrates 7th anniversary with plans to publish bi-weekly.

The free monthly newspaper Current is pleased to announce that it is celebrating its 7th anniversary with plans to become a bi-weekly publication. Mark Smith, publisher and co-owner says, "Current has grown from its early days as a small, alternative newspaper to the point where today, the paper is widely-read and a consistently profitable part the St. John's media marketplace. Nationally, 'free' periodicals are one of the few growth areas in the newspaper business and Current is firmly established in that niche."

When Current was launched in 1999 it was a labour of love. Sometimes the paper made money and sometimes it didn't. Roger Bill, Current's editor and Smith's partner says, "Current is still a labour of love for the people who work on it, but newspapers are a business. We have gotten great support from our advertisers, our bottom line is solid, and we think Current's is strong enough to take the next step."

In addition to publishing every two weeks Current is also investing in an upgrade of its online presence at www.currentmag.ca. Greg Locke, a veteran photojournalist and original editor of the Sunday Independent newspaper, will become the Online Editor of the new, dynamic and interactive website. Locke says users of the online edition can expect, "daily news, commentary, local information, lively discussion and debate. "A dynamic online service not only allows for more timely coverage and delivery of information but gives a direct and immediate voice to the public."

Starting on Thursday, April 27 Current will begin publishing every two weeks. "The support from both readers and advertisers with the idea of increased frequency has been tremendous," says Smith.

Bond Papers New Look

Brighter.

Cleaner.

Hopefully easier on the eyeballs.

Cleaned up right nav strip.

Call it Spring Cleaning at the Bond Papers.

Now all I have to do is learn to write in a more concise way.

(Yesssss.

I got the feedback - all of you - on the stream-of-consciousness nature of some of the Hebron stuff. That's why Friday's main post was a synopsis of the week's activity.)

Keep the cards and letters coming.

Next potential upgrade: podcasting.

Feds speak on offshore board appointment

Three days of coverage from The Telegram last week on the ongoing saga of Max Ruelokke.

You may recall he was picked to head up the board regulating oil and gas development offshore Newfoundland.

The provincial government is still pushing for St. John's Mayor Andy Wells. Originally, the province wanted Wells to be chairman and chief executive officer. When that didn't fly, they suggested the Nova Scotia approach, where their board is run by two people.

The part-time chair pulls in about 10K a year for her part-time efforts, although Andy Wells apparently believes the job pays almost as much as he currently sucks down for belittling people at City Hall.

Anyway, The Telly finally got a spokesman for federal natural resources minister Gary Lunn who said - after approval from the very highest of highest levels- that Ruelokke is in without Andy. We can say from the highest of high levels because the story has been all over town for weeks, right down to the response from the Prime Minister when he was briefed on the whole thing and the fact Ruelokke was supposed to start work the last week of March:

"There was an arbitration process that happened, the results of that process are final and binding and both levels of government are in a position where they will have to respect that," [Emma] Welford told The Telegram Friday.

Welford said Ruelokke's appointment will be made official "very,very soon."

"We wish him all the success in his new position," she added.

Overturning the decision made by the arbitration panel would require changes to federal legislation, a process that could take several months if not years. Premier Danny Williams has never explained why he is pushing Wells for the job.

Provincial natural resources minister Ed Byrne recently said: "It is our position that we would like to see the mayor involved in some capacity, particularly if the position was split, we'd like to see him as chair."

Byrne was not asked why the provincial government has not appointed Wells to the vacant provincial seat on the board giving Wells the ability to be "involved in some capacity." The provincial appointment has been available since before Danny Williams first spoke publicly about appointing Wells.

In the meantime, the ministerial co-ordination e-mail in effect in Ottawa doesn't seem to be working. Better known as the gag order, it required every cabinet minister in Stephen Harper's administration to have his or her public comments vetted by the Prime Minister's Office.

After Emma told the Telly what - wait for it - the Prime Minister had approved, federal fish minister Loyola Hearn was telling VOCM something different:

Federal Fisheries Minister Loyola Hearn says he suspects an official announcement on the new chair for the Canada-Newfoundland and Labrador Offshore Petroleum Board will be made sooner rather than later. Max Ruelokke is waiting to take on the post, having apparently been selected by an arbitration panel. Hearn says he would think with the conversations he's had on the matter, the announcement will come very soon. Hearn says a change in legislation to divide the position of CEO and chairman, is a possibility if the two governments agree on that.

Loyola's comments are basically the same as what he said last week on this file, except for a decisions being made sooner rather than later. Looks like Loyola needs to read more memoranda or have his staff deliver better briefings.

Maybe Loyola is just out of the loop on this one altogether.

After all, he apparently told VOCM legislation would be a possibility if the position at the offshore board were split into two jobs. Had he been in the know, Loyola would have known legislative change would be mandatory: that's the only way to vacate the decision made by the arbitration panel under the Atlantic Accord implementation acts.

Spindy 2: The Second Coming

Outlets for The Independent have a letter this week advising that the paper, under new management, will be returning to shelves next weekend at a cover price of a twoonie.

That's up fifty cents from the price when the paper died last weekend. Managing editor Ryan Cleary told CBC News that the paper had a circulation of 7, 000 when it folded but apparently gave no indication of whether that was 7,000 paid subscribers, 7,000 copies sold weekly or a combination of paid subscribers and sales at news stands. Subscribers paid a loonie to have the paper delivered each week.

Interesting to watch will be the advertising, which normally would pay all or most of the cost of printing a newspaper. In the late 1980s, Premier Brian Peckford withdrew all government advertising from the weekly Sunday Express in retaliation for its coverage of his administration's greenhouse folly. A similar policy was applied against the Daily News.

An increase in provincial government advertising might indicate the opposite policy being adopted toward The Independent.

In any event, the Spindy will be back next week, apparently.

Whither the offshore? Hebron collapse likely to bring unwelcome results

In the wake of the collapse of the Hebron project, investors are reviewing their plans to invest offshore Newfoundland and Labrador, according to Paul Barnes, the East Coast manager for the Canadian Association of Petroleum Producers.

"[They're] trying to understand the investment climate here in the province. Is it as good as it once was or is it starting to deteriorate? They're taking all that into account before they take future investment decisions."

There's no under-estimating the repercussions from the collapse, which appears to have been triggered by Danny Williams' insistence on an equity position in the project. Industry insiders have complained publicly about Williams' efforts to change the rules as the game was being played, including announcing publicly that the equity demand as a deal-breaker only a few weeks before the negotiations collapsed.

Williams offshore vision a personal one

The companies rejected the demand for an equity stake which would have given the province's hydro-electric utility a seat at the operator's table. Hydro has no experience in the oil and gas sector, although Premier Williams has described his wish to get involved in exploration work.

"We are prepared to have a full stake and, if necessary, at some point we will get involved in frontier exploration, whatever the opportunities are," Mr. Williams (Photo, right) said in an interview.

No one should doubt the Premier's deep personal involvement in the oil issue. Asked by the National Post why the province was interested in getting into the oil and gas business with its high cost and high risk, Williams replied by describing his own qualities and characteristics.

Williams likened his equity goal to having a local Norsk Hydro, but Newfoundland and Labrador Hydro operates more as a government department and less like a private sector corporation.

Conflict of interest a likely problem

Oil company executives may have been concerned about the Hydro company's cozy relationship with the provincial government. Hydro chief executive officer Ed Martin acted as the provincial government's chief negotiator in the Hebron talks on industrial benefits and tax and royalty payments to the provincial government.

Those close ties to government would likely have made the industry nervous that the presence of the state-owned enterprise on its team would compromise confidentiality in any dealings with government on current and, more importantly, future development projects.

There are no signs Williams plans to change that relationship in the near future.

Province's go-slow approach won't help speed investment decisions

Investment decisions are also likely to be adversely affected by the go-slow provincial approach on many things. A gas royalty regime has been in development for some time but Williams has said it will take until the end of 2006 for the government to announce any decisions. Likewise, the province is reviewing its royalty regime for the Laurentian sub-basin. That won't be released until the end of 2006 either, according to Williams.

With that time frame, investors would need time to assess the competitiveness of the regime and then do preliminary calculations on any project they are considering. By the time an operating agreement is negotiated on multi-partner operations, and other preparatory is completed, it would difficult to see any new development deal being signed within the next two to, perhaps three years.

Even a deal signed in 2007 likely wouldn't achieve first production until 201-2011. Offshore production is expected to decline by one third to one half of current levels in that same time frame, lowering with it provincial revenues. Growing oil revenues fueled a 10% increase in government spending this year with promises of tax cuts in 2007, an election year.

No Hebron hurts regions, undermines government's fiscal plans

Some are beginning to wonder how finance minister Loyola Sullivan will be able to afford many of his pre-election spending plans in the absence of a multi-billion cash injection that would have come over time from Hebron. Projected royalties alone from the dead deal were equal to the provinces total consolidated debt. Total revenues, including corporate taxes might have reached as high as $13 billion over the life of the project.

The Conference Board of Canada said in February 2006 what while production at White Rose and the Voisey's Bay nickel mine will boost the provincial economy to grow by 6.4% in 2006, the future looks different. The Board projects growth for 2007 at just 1.5%.

"Until there is another boom in construction or mining activity, the overall prospects are rather moderate to weak," said Marie-Christine Bernard, associate director of the board's provincial outlook.

That $13 billion for Hebron doesn't include start-up costs - projected at $5.0 billion - which included building a new gravity-based structure, likely at Bull Arm with portions of the topsides likely built at Marystown. At that price, the Hebron project was slightly smaller than the Hibernia project and approximately the same size as the Premier's pet Lower Churchill construction. Those construction costs represent the sort of boom the Conference Board of Canada was referring to. Without it, economic growth will likely not keep pace with ancticipated government increases in spending coming into the 2007 election year.

In the meantime, the failure of the Hebron project adds to the economic problems in some regions, like the Burin peninsula where plant closures by Fishery Products International and lack of an economic alternative or a government assistance package have left many local residents with as little as one week's unemployment insurance to come.

Residents and community leaders on the province's Burin peninsula told CBC television on Thursday that they cannot remember a time when both the Marystown shipyard and the local fish plants were shut down simultaneously. A year ago, Marystown shipyard finished fabrication work on White Rose, the last oil field to be brought into production. More than 1,200 men and women worked at the yard at the time. Today, it lays mostly idle with 30 workers.

National reaction a clue to damage

Perhaps the most noticeable sign of the province's potential problem in attracting investment comes with the comparisons being made in national media between Danny Williams, Russian president Vladimir Putin and, especially, Venezuelan strongman Hugo Chavez (photo, left). The Hebron story has run for most of the week in both the National Post and the influential Globe and Mail with negative connotations in each story for Danny Williams and Newfoundland and Labrador.

The story has also been covered in the the heart of Canada's oil industry, Calgary, where Williams' scolding of Albertan Conservatives over the Ralph Klein leadership vote tweaked more than a few noses. The Calgary Herald ran a commentary this week that said, in part:

When he spoke to Conservative party delegates on the weekend in Calgary, Newfoundland and Labrador Premier Danny Williams offered unsolicited advice to Tories on how they should have voted in Premier Ralph Klein's leadership review.

In that spirit, here is some advice for Williams: Stop acting like a tin pot, banana republic demagogue.

That image - as popular as it may be on the radio call-in shows - does win elections in the short-term.

But outside Newfoundland and Labrador, where the investment money will have to come from, and over the longer term, being portrayed like a goon or gangster doesn't help brand Danny Williams as someone with whom the investment community can do business. When Williams identifies the province's goals and his own goals as being identical - as he clearly did in one recent interview - the province wears whatever label Danny gets.

Danny Williams' "youngest and coolest" rebranding initiative looks rapidly like it's becoming a waste of money. Outside the province, the image is becoming set in concrete and it is not about being young or cool.

And that won't put money in the treasury where and when it is needed most.

Dawn of the In-dead-pendent?

A year ago, The Independent was running radio spots telling us all that to be informed everyone had to read the Spindy.

Now the former managing editor is trying to revive the paper with an appeal for people to subscribe and advertise in it. (Of course, they published their last number almost a week ago.)

Perhaps the next thing will be a ragged- arsed writer standing outside Coffee and Company holding out a sign that reads "Will investigatively report for food".

The paper went out of business with some dignity last weekend.

If people wanted to support the Indy they would have done it already. They didn't. Maybe some people's energy would be better spent figuring out what went wrong and trying again with a new venture. It would beat the hell out of making a mockery of the last edition of a newspaper a lot of people thought very highly of.

There is a need around this province for a genuinely new voice.

We just don't need one that lurches about moaning "uunnnnnnnh" all the time.

Hebron background

The Hebron-Ben Nevis is the second largest of the four major oil discoveries offshore Newfoundland and Labrador. Hebron-Ben Nevis is located in the Jeanne D'Arc Basin, approximately 300 kilometres east of St. John's Newfoundland and Labrador.

It consists of Hebron, discovered in 1981 West Ben Nevis and Ben Nevis (discovered 1980) with estimated recoverable oil reserves of between 400 and 700 million barrels. The bulk of the oil is heavy (API 20), making recovery more complicated than at Terra Nova, Hibernia and White Rose.

The fields were considered non-commercial for some time after discovery owing to the physical difficulties in the field, including the presence of large quantities of heavy oil.

The four corporate partners - ExxonMobil, Chevron Canada, Norsk Hydro and Petro-Canada - drilled appraisal wells in 1999-2000 and began evaluating the potential for development in 2000. This work was discontinued in 2002. After some delay, the partners concluded a joint operating agreement in April 2005 and shortly after began discussions with the Government of Newfoundland and Labrador on a royalties and benefits agreement.

These discussions concluded on or around 31 March 2006 with no deal being reached. Chevron Canada announced the suspension of the project and began redeploying its personnel in St. John's to other projects around the globe. There is no indication that the partners will pursue the project in the near term (less than five years).

Development cost of the field to first oil was estimated by the partners at between CDN$3.2 and CDN$5.2 billion, making it the second most costly project in the current offshore. The preferred production mode was a gravity-based structure (GBS). Experience gained on Hibernia allowed the companies to reduce the size and hence the cost of the GBS. Field life is estimated at 20-25 years pending further delineation.

Left: Built between 1990 and 1997, the Hibernia gravity-based structure contains drilling rigs, living quarters, oil storage and other facilities to sustain production at Newfoundland and Labrador's largest offshore oil and gas field. [Photo: Greg Locke/Picturedesk International]

While it unlikely in the near-term, as technology develops or as other options emerge, the partners may switch production modes to a less costly method than GBS. This would reduce the local industrial benefits to Newfoundland and Labrador but improve the corporate profitability of the project.

Media reports this week indicated that the provincial government would have received CDN$8 to CDN$10 billion in royalties over the life of the project. This does not include other provincial revenues related to oil production. The current provincial debt, on a consolidated basis, is approximately $11 billion.

In 2006, the Government of Newfoundland and Labrador estimated that it will receive more than CDN$700 million in royalties from current production and an additional CDN$224 million in corporate taxes. A similar or improved ratio of royalties to corporate taxes could have been be expected from Hebron given that project royalties from the development were equal to or greater than royalties from the three existing developments combined.

Peter Fenwick on Hebron failure

Realization that the Hebron deal is dead is starting to sink in across the Newfoundland and Labrador oil patch. Hope of possibly restarting talks and concluding a deal have faded and more and more individuals and businesses are coming to understand that the Hebron partners may not seek again to develop the field for at least two years.

National media criticism of Danny Williams in the Globe and the National Post continues to be strong. It makes their previous criticism during the flag flap in 2004/05 look like a love tap. What the national newspapers and columnists are saying about Danny Williams' decisions about Hebron makes their condemnation of Tobin's "Not one teaspoon" stunt with Inco over Voisey's Bay in 1998 look like foreplay.

While the rhetoric has been extreme in the wake of the deal's collapse, cooler heads will start to look at the entire issue. The blame game will end and people both inside and outside of government will see if there are lessons to be learned.

Ultimately no one profits from blame - as much fun as it can be in the short term. The goal must always be to learn from bad situations and figure out how to move forward positively.

In the meantime, there is this column "Newfoundland's shakedown racket" in the National Post from former provincial New Democratic Party leader Peter Fenwick. Criticizing Williams by comparing him to Hugo Chavez or Vladimir Putin is not only unfair, but also only boosts his stock in the wrong-headed circles clogging radio call-in shows. Condemnation from The Mainland only serves to rally the locals around their Leader in the short term.

In the longer term, as with Tobin, the costs of these situations can be severe. Screwing with the local business community can be deadly and there are undoubtedly deep wounds Danny Williams needs to heal. Tobin suffered a steady erosion of his support - at least in private. Roger Grimes paid the price for Tobin's folly as well as his own shortcomings.

There is value in heeding Fenwick's last comment:

There's a reason Newfoundland has seen over two decades pass since the discovery of a new oil field: If you keep changing the rules, people won't want to play.

Hugo Chavez may not be able to grasp that reality. Danny Williams is too savvy to make the same mistake.

Hebron equity and a possible conflict of interest

Premier Danny Williams provided more information in the House of Assembly on Wednesday about negotiations between the Government of Newfoundland and Labrador and the companies that proposed development of the Hebron-Ben nevis field offshore Newfoundland.

Following are extracts from the Premier's comments, followed by commentary.

1. On the equity position:

The reason we went from 8.5 per cent to below 5 per cent was because 5 per cent was a critical turning point in the joint venture agreement. The partners could not unanimously deliver more than 5 per cent to the Province of Newfoundland. Under that circumstance, there would be absolutely no agreement whatsoever. Four point nine percent is critical because when you get to 5 per cent there is an absolute veto right on all decisions.

This Province, in order to achieve 4.9 per cent, which could probably give us $1.5 billion additional return over time, was prepared to concede a veto right. We are not interested in a veto right on the project. That is the reason.

Comment: Two new significant pieces of information here.

First, we learn for the first time that an equity position above 5% would have given the provincial government a veto over management decisions. From other public comments by the Premier and others it appears that the companies either could not would not alter the joint operating agreement, hence the government's decision to accept a piece of the operation beyond royalties and other revenues at 4.9%.

The Premier's remark at the end that the province didn't want a veto is moot since the province could never have obtained one under the circumstances without likely forcing a complete renegotiation of the joint operating agreement signed in April 2005 among the corporate partners.

Second, we learn for the first time that the equity position was estimated to yield $1.5 billion in revenue that was over and above the $8 to $10 billion going to the province in royalties.

2. A. Was there a January 26 agreement or a position taken by the corporate proponents?

It was a January 26 position. That is exactly what it was. It was a position that had been negotiated down from their position over the course of two months. That is what was done between Mr. Martin and Mr. Bates, with intervention by us at certain points in time. What they did on last Thursday night, when we finally got down to the two final issues - which was equity and super royalty. When we had agreement on those issues, they reverted to the January 26 position, which included investment tax credits, which would have cost the Province about a half billion dollars. So, you had four companies that, collectively in revenues last year, made $590 billion and were looking for our Province to give them another half billion dollars. That simply was not on.

Comment: There are two new pieces of information here as well.

A. Recall that yesterday the Premier referred at one point to a January 26 agreement. The Premier categorically states today that in fact there was no January 26 agreement. He notes that there were negotiations which latterly dealt with the equity position and so-called super-royalties.

On Tuesday, the Premier said, describing the companies position: "Oh, yes, but we want all the terms that are in the January 26 agreement, with the exception of these two." Even if we grant that there was no formal agreement on January 26, it appears likely that ultimately the companies did not accept the provincial government's position on equity and super-royalties.

The Premier has said there was an agreement on equity and super-royalties; evidently there wasn't, otherwise the companies would not have reverted to their position on January 26 less two items, namely equity and super-royalties.

Part of the difficulty in assessing the Premier's comments may come from the different definitions he seems to apply to agreement depending on when he refers to his position and when he refers to the position taken by the companies. The negotiations do not seem to have followed a pattern in which items were settled and formally noted as settled. Thus, the parties - particularly the provincial team - could make a fundamental error in believing that some issues were settled when in fact they had not been.

When the Premier states there was an agreement up to this past weekend and that January 26 was a position, he is stating his interpretation of events. The companies may well have felt that from their standpoint, the January 26 position represented the basis for agreement given discussions up to that point.

We do not know when the Premier formally presented the demand for an equity position, however it appears likely that negotiations did not begin on this point until after January 26. Note that the premier did not publicly indicate that equity was a condition of an agreement until after January 26. Note as well that the Premier indicates the January 26 "position" was the result of two months of negotiations from a previous position put forward, presumably by the companies. One can easily see how such a process could lead to this document - if it is a document - being called an agreement, especially if the provincial team did not reject it formally or proceed to amend any of the contents.

By the same measure, the companies could conduct discussions in good faith, as it appears both parties did, have some legitimate misunderstandings and see the whole deal collapse at the last minute to everyone's evident consternation.

B. Was there an inherent conflict of interest in the provincial negotiating position?

The Premier refers to negotiations conducted by two representatives, namely Mr. Martin on behalf of the provincial government and Mr. Bates on behalf of the Hebron consortium.

Mr. Martin is Ed Martin, a former oil industry executive and currently chief executive officer of Newfoundland and Labrador Hydro.

These negotiations had two elements: one focused on the demand for an equity or partial ownership position in the operating consortium. The second was on royalties and other revenues to be paid to the province as economic rent for oil production as well as local industrial benefits as defined in the Atlantic Accord (1985).

To date, the Premier has not indicated how the shares in the operating company would have been managed. They could be held by an corporation like the Canada Hibernia Holding Corporation which reports to the federal energy minister. His officials would represent the federal government in making any decisions related to the federal government's shares in Hibernia, for example.

More likely, the shares would have been held by Newfoundland and Labrador Hydro as the province's new energy corporation or in a holding company managed by the revamped Hydro corporation. This would be consistent with the Premier's comment to the National Post:

With Newfoundland's business community anxiously holding out hope that negotiations will be revived on the Hebron Ben Nevis offshore oil project, Premier Danny Williams yesterday made it clear he is prepared to make the province a full-fledged partner in the multi-billion-dollar venture.

"We are prepared to have a full stake and, if necessary, at some point we will get involved in frontier exploration, whatever the opportunities are," Mr. Williams said in an interview.

Mr. Williams said his government is prepared to participate in all aspects of developing his province's offshore oil and gas resources through the provincial hydro corporation. He said he would like to model Newfoundland and Labrador Hydro after Quebec Hydro and Norsk Hydro, Norway's state-controlled energy company. [Emphasis added]

There is the strong possibility that by combining these two very different sets of negotiations in one that the province placed itself in a position whereby acquisition of shares in the operating venture could be inappropriately related to the province's royalties and other similar revenues. This would be similar to the Hibernia negotiations in which the province essentially traded off the gravity-based structure costs against future royalties.

Such a situation is implied in the Premier's comments on Tuesday that suggest the request for $500 million in tax concessions reduced the overall benefit of the equity position, even though the two issues should actually be considered separately. The equity stake had an intrinsic public policy value separate from the other "provincial benefits". As such the cost of the tax concessions ought to have been weighed against the $10 billion in royalties, not the $1.5 billion returned by the shares, or any combination of the two.

Of greater concern, though is the potential that in the second share management scenario, Mr. Martin was effectively placed in a conflict of interest during the negotiations themselves. Had the negotiations been successful in the second share management scenario, Mr. Martin would have been, for all intents and purposes, a co-owner of the Hebron development. As such, he would have naturally been concerned to lower the start-up costs of the project in an effort to maximize corporate profits. These profits would then be turned to whatever purpose the Crown-owned agency determined, including development of the Lower Churchill.

There is no question that in a typical situation, Mr. Martin as an operator, would naturally look positively on a request to lower start-up costs such as requesting forgiveness of certain taxes or the seeking of certain tax credits. No matter what a company's overall financial position, a project such as Hebron would be expected to operate as efficiently as possible, with the lowest costs and hence the maximum profits.

At the same time, though, Mr. Martin was operating as the province's chief negotiator on behalf of the public treasury. In a manner of speaking he was functioning as the tax collector. As such he would seek to maximize the revenue flowing to the public treasury; naturally this is separate from the Hydro corporate treasury. Thus, his negotiating brief ought to have given him clear direction to minimize concessions, except in so far as those concessions would bring a greater return in such things as local jobs. His public treasury role ought to have carried with it considerations separate from those of his brief as a co-owner of the development along with the major oil companies.

Under the second share management scenario, Mr. Martin appears to have been in a conflict of interest. He was on the one hand seeking to maximize the treasury returns while at the same time negotiating his way onto the Hebron management team, with its obvious concern to lower costs and maximize profits.

It is irrelevant that Mr. Martin would have been placed in this position by the provincial government itself. The provincial government appears to have been trying to achieve two separate public policy goals in the same set of negotiations. This may have contributed to the collapse of the negotiations.

Hebron: Did Williams kill the $10 billion fatted calf with last minute gamble?

Some additional information on the failed Hebron deal came to light on Tuesday in the House of Assembly.

The Hebron project was a $5.0 billion construction megaproject that would have delivered an estimated $10 billion dollars in royalties to the provincial government over the life of oil production.

Following are Premier Danny Williams' remarks with notes and comments after each. The posting runs more or less sequentially as Williams responds to questions from Opposition House Leader Kelvin Parsons.

If you want the truly surprising information, skip to the section marked "*".

1. On the equity position:

"...A critical milestone for them on equity was 5 per cent. Five percent and above jeopardized the joint venture agreement. There was extra voting rights. There were other rights and privileges that were above 5 per cent. Our preference would have been to obtain, at least, 8.5 per cent. That was our original goal because that is a benchmark which has been set by the federal government in the Hibernia project and that was a number that we were trying to achieve. However, in order to try and reach an agreement with these companies, we moved to the 4.9 per cent position because that was a position that they felt was acceptable to all the partners...."

Comment: This is interesting because for the first time the premier has indicated both the preferred size of the equity position (8.5%) and the subsequent position he contends was agreed to by all parties (5%).

Most interesting is the revelation that the province proposed a 4.9% since this level precluded the province from holding voting rights that would affect the original joint operating agreement.

This acknowledges two things. First, the province would not have held a full equity position in the project, thereby begging the question of what exactly the Premier was seeking so stridently and why.

Second, since the equity position was placed below 5% in order to avoid affecting the joint operating agreement the Premier implicitly confirmed the partners contention that equity was a new condition placed on the Hebron project by the province after April 2005.

2. The cause of the collapse:

"...we basically had a tentative agreement on equity and on super royalty on Thursday evening. The matter on which it broke down, which I explained yesterday to the House, was they reverted to the January 26 position, which is investment tax credits which were in the range of $400 million to $500 million, which was something that we had virtually assumed was off the table and was gone. They then reverted to a position of two months ago, which was absolutely unacceptable to the Province."

Comment: It is interesting that the Premier chose the words "we had virtually assumed" when discussing the issue of the investment tax credit and the sales tax credit on fuel purchases related to the development. Ordinarily, the parties to a negotiation would exchange plain language statements of what had been agreed to. Such an exchange would be particularly important if, as the premier contends, there was an agreement on Thursday evening. This approach is intended to avoid the very circumstance - potentially a misunderstanding - which seems to have occurred.

Apparently in this case a detail significant enough to cause the deal to fall apart was "virtually assumed" to have been eliminated. When one assumes one makes an ass...

The overall approach here may be similar to the slipshod way the province handled discussions with Ottawa in 2004. The federal and provincial governments did not begin negotiations (exchange proposals and position statements) until October. Detailed talks took place throughout November and into December, with Williams making a dramatic pre-Christmas explosion not unlike his media scrum on Monday.

This comment by the Premier begs one of the major questions surrounding the Monday disaster: how could $500 million scuttle a deal that would deliver to the provincial government royalties equal to or greater than the total provincial debt ($10 billion)?

* Alternate explanation: The Premier killed the deal by adding equity and insisting on it.

Later in Question Period, the Premier described the collapse this way:

Then when they send a memorandum into us, the memorandum gets cute and basically comes back and says: Oh, yes, but we want all the terms that are in the January 26 agreement, with the exception of these two. So, we basically said that is not on. Because what would have happened then, that would have clawed back everything that we gained. We would have ended up with an agreement that was basically less than generic, which is exactly what your government was prepared to accept some two years ago.

Comment: In this section the Premier refers to a January 26 agreement. Williams is normally careful in the words he uses. To refer to January 26 as an agreement may be taken as deliberate or at least a reversion to terms he has used in private.

Note that the Premier had previously referred to January 26 as being merely a position taken by the Hebron partners. (See Point 1 above)

Also, the Premier refers to the companies as having brought back the January 26 agreement less two clauses. The Premier's contention up until this point has been that it was the addition of two clauses to the late March agreement that caused the collapse.

This is significant since the Premier's new version suggests a foul-up on the part of the provincial negotiators ("we had virtually assumed") with the magnitude of the error only becoming apparent once a final summary was exchanged.

These comments by the Premier also reinforce the contention that equity was a last-minute addition to the agreement. Note that Williams did not publicly make equity a condition of a deal until after 26 January. Check that in a previous Bond Papers posting, "Hebron, the premier and getting a deal".¹

Ultimately, though, this particular description of the collapse raises significant doubts about the Premier's account of events. On a deal with provincial revenues on the order of $10 billion with hundreds of millions of dollars of added benefits for the private sector in the province, it is curious that the addition of $500 million in short-term tax concessions would completely negate every other gain the Premier had supposedly made.

If the Premier had negotiated such a remarkable agreement, then by his own account, $500 million would turn this deal into one that involved the province getting less revenue than provided in the generic royalty regime.

On the face of it, this seems preposterous.

These comments make more sense if we interpret these remarks to mean that after a period of discussion with the Premier on so-called super royalties and something being called an equity position, the companies rejected the Premier's efforts to change the January 26 agreement.

Instead, their final position was to insist on the January 26 agreement already reached, including tax concessions but "without these two elements", that is super royalties and equity of any size.

The reference to "clawed back everything gained" would refer to the loss of equity and super royalties which, in fact might not have been gained at all.

This is consistent as well with a comment in a presentation made by Chevron's Mark Macleod in February 2006. One of Macleod's bullet points in a slide show on Hebron indicated that the companies were "re-evaluating potential for development". The language is telling. The project is not being evaluated. There are no discussions to finalize an agreement. In February 2006, the Hebron partners are evaluating the project once again for development.

The only comments the Premier would need to clarify is on the January 26 agreement producing royalties of less total quantum than the generic regime.

3. The cost of buying out ExxonMobil's 38% interest in Hebron

"...Having said that, with regard to the price that the government is prepared to pay for Exxon Mobil'’s interest, we are dealing in hundreds of millions of dollars here. I am not prepared to announce to Exxon Mobil today what we are prepared to pay them...."

One would expect that the price for the major shareholding in a project like Hebron would comprise costs incurred to date, possibly a portion of the $5.0 billion construction costs and almost certainly compensation for future earnings on revenues from oil sales.

To give some sense of what gross revenues would be on Hebron, the current value of Hebron oil, based on US$50 per barrel oil would be $35 billion. Even using a discounted price heavy oil running US$15 lower than that, the field is worth $24.5 billion. It is difficult to imagine ExxonMobil selling its interest for the hundreds of millions the Premier claims it would cost.

-----------------------------
¹ During the offshore revenue talks in 2004, the premier consistently shifted his public position once agreement had been reached on certain points. It was not until Ottawa stood firm in October 2004 that Williams came to the table and negotiated a final deal. Several posts on this can be found here.

It is not unusual, for example, for the Premier to claim that an agreement existed when no negotiations had taken place, that there was an agreement when evidently there was not one, or that, as in this case, the other party was being perfidious. careful examination usually reveals something closer to the truth than the Premier's often contradictory statements.

Why Danny wanted Andy...at the offshore board

Since Danny Williams first confirmed that he thought Andy Wells would be the perfect chairman for the federal-provincial board that regulates the offshore industry anyone with half a clue about the board and the industry has been trying to come up with a plausible reason to a simple question:

Why?

Turns out that we got it right from the start. Last July, when the story broke one of the scenarios offered up as a possible explanation was that Wells appointment would be part of a plan to push around the oil companies.

1. Wells, who knows little about oil and gas regulation but much about kicking up a stink, would be well positioned to bugger around with the forthcoming Hebron proposal. Wells would be a tag team with the Premier to try and push Chevron around a bit and since both men are of similar minds, there'd be less bickering between the two of them than between them and the oil companies.

There were a bunch of other posts - here, here, here, here and here - all of which pointed out Wells' consummate unsuitability for the position by any ordinary measure. In the meantime, the selection process set out in the Atlantic Accord (1985) turned up a proper candidate. Word on the street has it locally that the matter has gone all the way to the current Prime Minister who has blessed the results of the committee chaired by Newfoundland businessman Harry Steele.

Tapped for the job is Max Ruelokke, a former provincial public servant with the private sector oil and gas experience needed in the regulatory authority.

Anyway, since the Hebron deal collapsed yesterday, Williams has been threatening to legislate ExxonMobil out of the oil patch for refusing to go along with what Danny wanted. Williams' former law partner, outgoing New Democratic Party leader Jack Harris is sounding like the deputy premier lately than anything else. Harris told the local CBC radio drive show this afternoon that Williams was dead on in his overall approach to Hebron and pointed to several sections of the Atlantic Accord implementation acts under which the companies could be forced to develop Hebron.

Flip over to the federal implementation act and you can find section 79, among others which give the Canada-Newfoundland and Labrador Offshore Petroleum Board the power to order a company to produce oil within three years or surrender its license. The same ability is contained in section 78 of the provincial implementation act.

Lawyers and purists will point out the serious practical problems with trying to use these powers when there is no security of supply problem or in a period other than an evident national emergency. There would even be difficulties in having Wells as chairman trying to get the board to issue such an order without the - unlikely - concurrence of the Government of Canada.

None of that is the point. With Andy as chair of the offshore board, the past two days would have seen him filling every available television screen backing Danny with Well's own form of bluster to match Harris' more polished support. Wells' frothing about the evil foreigners pillaging our resources would take some of the political heat from the Premier.

But while negotiations were underway, the Premier could be quietly threatening the oil companies with unleashing Wells if they didn't co-operate. Perhaps Wells himself would be talking up his potential exercise of the offshore board's extra-ordinary powers. Count the number of times today Jack Harris mentioned Hugo Chavez favourably in the same breath as Danny Williams and you get the idea of what might be in some people's minds.

As strange as it might seem to have a Conservative premier and a New Democratic Party leader on the same wavelength, one need only look at Williams populist performance and many of his policies to understand that Williams is not a Conservative in the sense most people would use the term.

Williams is philosophically a Peckfordite, albeit a more refined one. Williams' policy manual reads in many parts like the brian Peckford offshore policy. The demand for an equity position is taken straight from policy in vogue during the 1970s when even ostensibly Conservative governments around the globe supported state ownership of large sections of the economy. In 1980, the Peckford administration passed legislation creating a state-owned energy corporation which would own, by law, 40% of any significant discovery. Williams' policy goals may seem smaller but they are fundamentally aimed at the same objective. No surprise that Peckford's former energy advisor thinks Danny Williams is on the right track.

Putting Andy Wells in charge of the board regulating the province's offshore resources fits with the pattern. It took a while to see what the objective was in pushing Wells for a position he was demonstrably unqualified to win on his own.

In the midst of the Hebron mess, Danny Williams objectives become clearer.

Oil industry backgrounders

Check offalnews for three articles penned by one Simon Lono on Newfoundland and Labrador's oil and gas industry.

These are the raw versions; the print ones appeared in Atlantic Business Magazine last month.

Note in particular this portion of an interview with energy minister Ed Byrne. It's been quoted on the Bond Papers before and Simon will post the whole thing in a couple of days. The edited version is at ABM.

MINISTER BYRNE: From our point of view, equity is important from this perspective: it puts us at the table and helps us develop an intellectual capacity that doesn'’t necessarily exist within the provincial structure right now. It puts us in the seat as a legitimate bona fide partner in developments. It helps us gain further insight, expertise and knowledge into the oil and gas industry. It has worked successfully as a model in other jurisdictions and there'’s no reason to think it wouldn't here. Other jurisdictions are both equity partners and royalty partners. So while there is some legitimacy in saying that equity is represented by royalty, there are other benefits associated with being an equity partner. [Emphasis added]

The Premier miscalculates

Expatriate Canadian Howie Mandell hosts a new American television network game show called "Deal or No Deal" in which contestants pick cases hoping to win a million dollars.

At stages in the game, contestants are offered other settlements. The game rests on the contestant's ability to know when to quit and take the cash in front of him or her rather than go bust.

The drama of the show for viewers comes from the contestant's miscalculations. They continue to press on despite the odds shifting against him or her and viewers scream at the television set. We wonder how people could be so stunned as to turn down a half a million dollars when they would likely go bust long before the last case is opened.

Too many of them are hypnotized by the top prize that is really just an illusion. They push and push and wind up with a pittance or worse still wind up with the briefcase containing a cent.

Miscalculations are a feature of Newfoundland and Labrador politics. Premier Danny Williams likes to focus on the times when his predecessors supposedly quit too soon and settled for too little. Sometimes that happened. Sometimes it didn't.

Danny Williams and others who share his view don't like to talk about the times when the miscalculation was in gambling on the big prize despite having a good offer in plain view and losing most everything in the end. They forget that sometimes "All" can be the enemy of "pretty damned good".

Brian Peckford did the same thing on the offshore. While Nova Scotia settled for an arrangement with Ottawa that left begging the question of ownership but jump started their industry, Peckford ignored the legal advice that he would lose court references on ownership. Instead, he pressed on, picking first the Supreme Court of Newfoundland briefcase and then later the Supreme Court of Canada package. Peckford and his advisors were also hypnotized by promises of ever-escalating oil prices that mirror almost exactly the predictions being made today. Experience is a painful teacher and Newfoundland governments have plenty of such experience.

He lost both.

Badly.

And by the time Hebron was discovered, the same year Peckford lost big, oil prices ha plummeted to the point where the Hebron find - second biggest of the Big Four to date - was not commercially viable.

Were it not for Brian Mulroney, who in a truly remarkable act, signed the Atlantic Accord (1985), Newfoundland and Labrador today would be staring at nothing from offshore revenues. The most recent budget with its billion dollars of oil revenue in a single year simply wouldn't exist. We wouldn't even have the briefcase with the penny in it.

Leap forward to Danny Williams.

The Premier appears to have made fundamental miscalculations in negotiating with the Hebron partners.

First, he miscalculated the proponent companies' collective opposition to having a neophyte Crown corporation with no oil expertise sit at the table making fundamental decisions on a massive and complex oil project.

Second, he miscalculated the willingness of these partners to simply close down the Hebron project and put it on the shelf. He misjudged their willingness to move to larger, less cumbersome projects from a project that was only made more problematic and more costly by the premier's demands.

Third, and flowing from that, the Premier fundamentally miscalculated the extent to which the Newfoundland and Labrador offshore must be globally competitive. He seems to have been infected by the old view from Peckford's time that we would somehow be able to dictate to multi-national oil companies based on nothing other than our bluster.

Newfoundland and Labrador has oil and gas assets which are valuable, but we have smaller proven assets than many places on the globe. In Venezuela, for example, the assets are considerably greater. The importance of those assets to important markets like the United States are such that the companies are prepared to accept the posturing of local strongmen to get the oil out of the ground. Oil companies are prepared to work with all manner of regimes around the globe; Danny Williams inability to get a deal seems odd in comparison.

Right: "We got it!". Venezuelan President Hugo Chavez has earned praise at home and caused disruption in the international oil markets through his forceful policies with multi-national oil companies. Is Chavez the model for Williams' policies on offshore revenues?

Fourth, Williams miscalculated the impact of foisting new demands into the negotiations toward the end of the process. Williams claims he made the government position clear early on. Publicly, he only said he wanted a refinery and larger benefits and royalties. The equity position emerged within the last few weeks. The Premier himself took the refinery demand off the table when he announced a third party consortium would examine the feasibility of building a second refinery.

The Premier's initial comments on the Hebron failure suggest that he is aware of the miscalculations. When the Premier is threatened or under pressure, the intensity of his rhetoric and the range of options or threats he poses escalates, even if the options are mutually exclusive or not viable. Consider that during talks with Abitibi, for example, the Premier threatened the company with expropriation; no action has been taken and none would be taken. More importantly though, Williams was prepared to pay Abitibi more in an annual grant of public money than he made in tax and royalty revenue merely to keep the mill going with its 282 jobs.

Williams has threatened to "take out" ExxonMobil. His own comments undermine this position. If $500 million in tax concessions were too rich to acquire a five percent stake in Hebron, then surely ExxonMobil's share - 38% - would be eight times too rich for the Premier, even if he could find the billions to pay for the share.

Similarly, the Premier has threatened fallow field legislation in the same breath and to accomplish the same purpose. Under such an approach license holders would have a fixed time in which to develop a field or have the license be cancelled. Unfortunately, the Premier cannot introduce this legislation on his own; he must have the co-operation of the federal government to change an issue such as the issuing of licenses. Given the Harper administration's commitment to free enterprise and its base of support in Alberta's oil patch, it would take quite a leap to expect Stephen Harper to co-operate with an approach that to some will appear to be modeled on that of Hugo Chavez's Venezuela.

Likewise, the Premier has insisted as recently as this morning that Hebron's failure would have no impact on the province's oil and gas industry beyond the immediate loss of potential for the development. Again, one would be foolhardy to expect that ExxonMobil and the other partners in Hibernia South would bring forward a development proposal to the Williams administration having just gone through the Hebron experience.

He also points to gas potential which would supposedly offset the Hebron loss. It may. But in order for gas to be developed Williams has to deal with many of the same players he has just worked so hard to frustrate. Experience is indeed a harsh teacher.

Williams also does not have a royalty regime which describes even for planning purposes the likely costs of development. Faced with the Hebron example and the uncertainty of the gas regime, no one should expect imminent development of any gas resources.

On top of that he has made comments in the past about not wanting to see gas exported in "some goddamn boat". As much as Williams' energy minister Ed Byrne has tried to calm industry fears no one can be assured that Williams did not mean exactly what he said, even if the technology is locally developed, would create local jobs and benefits and produce the ability to also start a secondary gas processing industry here. Uncertainty is great in the oil and gas business these days and the industry will need some concerted calming by the provincial government before all is back to where it was.

Williams has also gone so far as to raise the spectre of the Upper Churchill contract in defense of his decision to help shelve Hebron. "No more give-aways" is his cry. Williams knows this is nonsense. His Abitibi deal should be proof enough that give-aways can rear their head even under his administration.

In this instance, though, Williams knows that the Upper Churchill power purchase agreement fixes the price of power at pennies per unit over the life of the deal. By contrast the province's generic oil royalty regime bases its calculation of provincial rent as a percentage of the price per barrel of oil. As prices go up, so too does the province's cut. If that were not enough, the regime contains tiers of royalties. Once the project costs are recovered the province's share jumps again by an order of magnitude. It jumps once again to a third tier - so-called super royalties - that are paid if other conditions are met. Unless Williams abandoned that approach - and there is no sign he has - then his comparison of Hebron to the Upper Churchill is specious, to put it mildly.

The Hebron proposal is now dead, apparently based on serious miscalculations by the provincial government. There will be repercussions. Anyone who believes otherwise is misinformed.

Part of the difficulty in soundly assessing what is going on is that Premier Williams has never explained what he means by "equity position" and why it is so valuable that $10 billion and substantive local benefits were not enough to pay $500 million to acquire. More detail and fact is needed. More accountability is mandatory.

It's not like Williams and his predecessor Brian Peckford have not led the province down this same path before.

It's not like we haven't seen leaders claim we got it when they didn't, accuse others of selling the shop or of shooting for the million and coming up with considerably less than what was in front of them a move or two ago in the offshore game.

Hebron failure: notes and observations

The Newfoundland and Labrador oil industry is reeling in the wake of news today that the Hebron development collapsed in the face of demands from Premier Danny Williams that the provincial government be given an equity position in the deal.

While little had been said of the negotiations coming down to the April 1 deadline, some had expected Williams to sign a deal. Instead, it appears Williams stood by his demand for an equity position. The companies were known not to favour involving the provincial government in management decisions on the project, even after Williams lowered the percentage he sought.

Williams singled out ExxonMobil as opposing the equity position, however it is likely several of the project partners had difficulty with Williams' demand. This was based on their experience with government involvement in the costly Hibernia project.

In an interview with CBC television's Here and Now, Memorial University economist Wade Locke described the royalties from Hebron - estimated at upwards of $10 billion over the life of the project - as being greater than the provincial government royalties from the other three fields in production combined.

Based on oil at US$50 per barrel, the 700 million barrel Hebron-West Ben Nevis-Ben Nevis development would be worth US$35 billion. The provincial royalty position Williams rejected represents 28% of the project's total potential revenues.

According to lead partner Chevron Canada, Hebron would have been the second largest development offshore Newfoundland and Labrador. Reserves are estimated at 400 to 700 million barrels, with development costs to first oil estimated to range as high as $5.2 billion. Under the operating agreement, the Hebron partners committed to use a gravity-based structure as the production mode. The fractured nature of the fields coupled with the heavy nature of the oil combined with the needed production mode to increase development costs.

NOIA, which represents the province's service and supply sector, predicted downsizing and shifts to business outside the province in the wake of today's decision.

"With a Hebron project delay," said Deirdre Robinson Greene, NOIA's director of communications and policy. "NOIA members have told us that they see reduced business opportunity and activity in their own back yard. If they are to continue operating, they have to look to other markets. That could mean anything from re-tooling for export, to re-locating, to perhaps re-deploying resources and workforce elsewhere. That all translates into less business and fewer jobs here in Newfoundland and Labrador."

In a scrum with reporters today, Williams accused the oil companies of not bargaining in good faith. He said the negotiations collapsed when the proponents sought an investment tax credit of 15% which Williams called unprecedented, as well as a tax exemption for fuel used on the project. Williams estimated the total value of these exemptions at $400 million.

If this figure represents a total cost versus an annual cost, there is no indication why Williams found this amount unacceptable while later in the same media scrum, Williams said the government was willing to spend the same amount to "take out" ExxonMobil from the project.

Williams repeated similar comments in the House of Assembly. He compared the province's demand for an equity position to the 8.5% stake that the Government of Canada purchased in the Hibernia project in the early 1990s. it is unclear whether Williams was prepared to purchase an equity position as the Government of Canada had done.

There is, however, an inconsistency in Williams' contention that one one hand the province was unwilling to forego less than half a billion in revenue in exchange for $10 billion while later claiming the provincial government was willing to purchase ExxonMobil's interest for the same amount. ExxonMobil owns 38% of the Hebron project, a share worth considerably more on the face of it than $500 million.

At no point has Williams described his goal in achieving a so-called equity position, nor has he indicated the benefits that would accrue to the province from an equity position, versus increased royalties. Williams has not indicated if his version of "equity" consisted entirely of cash or if it involved management rights.

Under the Atlantic Accord (1985), the Government of Newfoundland and Labrador collects revenues from offshore oil and gas as if the resources were on land. Williams did not explain today why he was prepared to reject $10 billion in royalties, plus billions in start-up construction benefits apparently for a cost of $400-$500 million in tax concessions.

Chevron Announces Plans to Suspend Hebron Activities

CALGARY, Alberta, April 3, 2006 -- Chevron Canada Limited, on behalf of itself and its co-venturers - ExxonMobil Canada, Petro-Canada and Norsk Hydro Canada Oil & Gas Inc.- today announced a decision to suspend negotiations with the Government of Newfoundland and Labrador and demobilize the Hebron project team.

"We have worked tirelessly with the Government of Newfoundland and Labrador, especially during the past year, to find ways to move the Hebron project forward, but significant and fundamental gaps remain on fiscal terms and benefits that would enable the project to proceed in a viable manner. We are disappointed that we have not been able to reach an agreement with the government," said Alex Archila, President, Chevron Canada Limited.

"Hebron poses a number of challenges due to the high degree of technical complexity associated with recovering heavy oil in a harsh marine environment," Archila said. "While activities are suspended at this time, the co-venturers remain positive that activities could proceed at a future date with the conclusion of a definitive agreement with the Government of Newfoundland and Labrador."

The Hebron field is located 350 km offshore the province of Newfoundland and Labrador. Chevron Canada Limited is the designated operator for Hebron, with a 28 percent working interest. Other Hebron owners are ExxonMobil Canada Properties (37.9 percent), Petro-Canada (23.9 percent ), and Norsk Hydro Canada Oil & Gas Inc. (10.2 percent).

Chevron Canada Limited, a Canadian subsidiary of Chevron Corporation (NYSE: CVX), is actively engaged in oil and gas exploration and production activities in Atlantic Canada, the Mackenzie Delta and Alberta's oil sands. Chevron Corporation, based in San Ramon, Calif., is one of the world's leading energy companies. With more than 53,000 employees, Chevron subsidiaries conduct business in approximately 180 countries around the world, producing and transporting crude oil and natural gas, and refining, marketing and distributing fuels and other energy products. More information on Chevron is available at www.chevron.com.

CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.

This press release of Chevron Corporation contains forward-looking statements relating to Chevron's operations that are based on management's current expectations, estimates and projections about the petroleum, chemicals and other energy-related industries. Words such as "anticipates," "expects," "intends," "plans," "targets," "projects," "believes," "seeks," "estimates" and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control and are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this release. Unless legally required, Chevron undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

U.S. Securities and Exchange Commission (SEC) rules permit oil and gas companies to disclose only proved reserves in their filings with the SEC. Certain terms, such as "barrels estimated to be recoverable" or "in-place oil volumes" and others are used in this press release that may not be permitted to be included in documents filed with the SEC. In addition, SEC regulations define activities associated with oil sands as mining-related and not a part of conventional crude oil and natural gas producing activities. U.S. investors should refer to disclosures in Chevron's Annual Report on Form 10-K for the year ended December 31, 2005.

Requiem for The Sunday Independent

The Sunday Independent is no more.

Actually, that paper died when it was bought out by local entrepreneur Brian Dobbin.

Now its successor newspaper, The Independent, is out of business as of yesterday when the last number went to the printers.

The official reason - repeated ad nauseum by Dobbin and managing editor Ryan Cleary - is that the paper ran out of money and time.

The official reason is a crock.

Dobbin and Cleary had two full years to do whatever was needed to make the paper viable. That's plenty of time. There was also plenty of cash, evident from the page three picture in the last number showing the staff members. By a rough count, the final staff was at least double the complement of the old Sunday Independent and may well be closer to triple the band that got the paper off the ground in the fall of 2003.

The magnitude of the bleeding will never be known publicly, but it was obviously enough to push Dobbin into abandoning the paper. The Current estimated last fall that Dobbin was losing about $10, 000 per issue; the real figure might well have been much higher once one considers how much of the Spindy's ad revenue came from Dobbin's other companies.

The real season the Spindependent died had nothing to do with time and money. No one can blame Trans-Con Media for this loss, either.

Nope.

The Spindy died because it simply never matched the grandiose claims its publisher and managing editor continued to make for it right up to the interment. In the whole twenty-odd months of its life, there was rarely anything in the Spindy you couldn't live without reading on Sunday when the paper came out; nothing that couldn't wait until Wednesday when you could get the paper online for free.

As we put it here at the Bond Papers a year ago:

the more Ryan slags everyone else and claims that his paper is somehow superior, the more I know it is just spin; pure unrefined shite. Every week, I look through the Indy and I have yet to see any story that isn't covered just as well if not better in any other news outlet in the province. Well, almost any. I don't read The Monitor any more.

And when I see recycled flatulent crap, as I did this week yet again, on the Indy front page, no less, I can explain to you why your circ sucks. It has nothing to do with CBC refusing your TV spots.

The basic problem is that you claim to be the newspaper for thinking people. You claim to be informative and a whole bunch of other things. Anybody who has looked at the paper knows that it isn't any of those things. Your ad campaign sets you up for a gigantic credibility gap when they hear the ad and then look at a paper that is more like the Spindependent or, this week, the Windypendent than the newspaper for thoughtful people.

If you want to boost your circulation, Ryan, stop telling me how great you are. Try writing a story that proves it. Stop with the grandiose and go back to the basics. Give me solid research, a novel approach, some background and good writing. No one is really interested with the stuff they can get anywhere else, including Open Line. And they obviously aren't really interested in pseudo-nationalist rantings in place of well-researched stuff that draws its conclusions from the evidence, not picks evidence to fit the preconceived conclusions.

In the long run, you'll find that approach is actually less expensive than the in-house ad campaign and it will be more effective in boosting your audience. Boost the audience and you can sell enough advertising to pay the bills.

To be fair, in the past year - especially in the past six months - the Indy generated better stories. The Melina and Keith series is an example, but sadly it was a rare example of the potential the Indy had but never came close to attaining consistently enough to make the paper financially viable.

Cleary's only big project - the much ballyhooed rack of Confederation six-parter - was an utter flop. He did not pull in "every brain" as he claimed in the last number of the paper. Instead he grabbed two refugees from radio talk shows, neither of them known for sticking with facts. By the looks of it, he did grab the janitor to cobble together something that didn't challenge the local orthodoxy. The Spindy series merely repeated it.

They had a conclusion and by God the facts would be chosen to conform to it. When problems occurred, the Indy management was quick to claim information actually in the public domain couldn't be found or was being withheld. In Newfoundland public life, the most common of barnyard animals is the scapegoat.

Not only did the Spindy fail to live up to its self-promotion, it also missed in another crucial area as well. In his final column, Dobbin writes of wanting to put in print what he had heard over a beer or while sitting at the dinner table.

There are two problems with that. First, what is heard over a beer is seldom better than the stuff Cliff Claven spouted. People don't quote barstool know-it-alls except to laugh at them. Second, and more importantly, what is evidently heard around the Dobbin or Cleary dinner table is not some radical new thought. It is very much the view of the local elite on everything from Danny-boy to Confederation.

For a supposedly brazen newspaper, being an Establishment mouthpiece is deadly. Upstarts need to be anti-Christs. They need to challenge orthodoxy, reject the conventional. They need to get in your face and stay there so that as much as people might publicly denounce you, your broadsheet is their secret, guilty pleasure.

The stuff they pull up the covers and read with a flashlight so the husband...or wife...wouldn't catch them at it.

The stuff they will need to go to confession about.

"Forgive me, Fahder for I have sinned. I read it in The Independent."

The Indy under Brian and Ryan was entirely conventional and totally orthodox. The audience they were shooting for already knew just about everything the paper printed and if they needed reinforcement, then surely they could get it by tuning in five days a week to Bill Rowe...for free. Without eyeballs, a paper can't attract readers. And without readers, there are few if any advertisers - the source of cash for all publications.

With all that said, mourn the loss of The Independent. This province needs another media voice, not because the rest is bland or suppressed, but because there are stories here to tell that aren't being told by anyone else.

Mourn the loss - hopefully a temporary one - of talent like photo editor Paul Daly and senior editor Stephanie Porter. They remained my only real reason for buying the paper each week. Sadly, they could not keep the venture afloat on their talents, as considerable as they are.

Above all else, mourn the loss of potential. If just for a moment the Indy had ever come close to what it ought to have been, we'd be sitting here on a Sunday with jaws on floor. We'd be gobsmacked at the latest revelation.

Instead, I am typing an obit I never wanted to see, let alone write.

I sincerely wish it were otherwise.

Danny Williams: "When I grow up, I want to be just like Ralph Klein"

As if falling for Paul Watson's April Fool joke on Costco and seal oil wasn't enough, Danny Williams flew off to Alberta on Friday to attend the Alberta Progressive Conservative party convention.

Speaking to delegates yesterday, Williams scolded Alberta PCs for their lukewarm endorsement of King Ralph's leadership. As VOCM reports it, "...he told delegates Klein deserves their gratitude for all he's done for the province. ... Williams said when he's achieved a fraction of Klein's success, he'd expect gratitude and thanks from his party."

"And I would expect to leave on my own terms, having won the mandate from the people," he said. "Ralph Klein deserves certainly no less." That's from the Edmonton Sun's incredibly short story on Williams' after-dinner speech.

The CBC version includes Williams saying "When I grow up, I want to be just like Ralph Klein."

I'll let you guys google Ralph to find out all the things The King of Alberta has done over the years that Danny might find praiseworthy.

The interesting thing here is that Williams took it upon himself to advise/lecture/scold Alberta Tories on their own leadership. Presumptuous would be one word for it, especially in light of the fact Ralph was asking for an endorsement so he could hang around for a couple of years, thereby leaving the Alberta PC's to have a fractious leadership convention and go to the polls all in the space of a few months.

"The delegates here have spoken. The delegates have said their thoughts -– they're the important people in this particular discussion," said Lyle Oberg, a former Klein cabinet minister, commenting on Williams' intervention.

That's really the point, isn't it?

The delegates get to decide based on all the facts.

Guest speakers don't.

____________________

Belated April Fool's Bonus:

In the photo at left, Premier Danny Williams explains the proper hand technique for seizing the ruling cheeks before planting the mandatory laudatory osculation on The Leader's hindmost region.

"Learn it now so I don't have to show you later."

Happy Confederation Day

On this day in 1949 - at the very same minute as this posting - Newfoundland officially annexed Canada.. errr Newfoundland and Labrador joined Canada.

For a fine description of what it means to be a first-generation Canadian, try nottawa's take. I never looked at it this way before, but there is something about Mark's perspective that has struck a chord in this first-generation Canadian.

Once you've finished with that, there is always the ahistorical blather of the pseudo-separatists.

I say pseudo-separatists because they slag Canada at every opportunity but are pathologically unable to remove themselves from the federal transfer tit long enough to advocate that Newfoundland and Labrador become an independent country once more.

Mark is right about one thing in particular. Newfoundland and Labrador should celebrate March 31st and the Prime Minister ought to make a habit of noting this day.

This is a day all Canadians should be proud of, especially as we go around the world helping others to develop the democracy of which we are so rightly proud.

Happy Confederation Day!

Left: Signing of the Terms of Union between Canada and Newfoundland, 11 December 1948.

Sir Albert Walsh (seated, right), chairman of the Newfoundland delegation, signs the Terms of Union at the Senate Chamber, Parliament Buildings.

Seated next Walsh is Prime Minister Louis St. Laurent.

Standing (left to right): Hon. Milton F. Gregg, Minister of Veterans' Affairs; Hon. J.J. McCann, Minister of National Revenue; Hon. Brooke Claxton, Minister of National Defence; F. Gordon Bradley, Gordon A. Winter, Philip Grouchy, Joseph R. Smallwood and J.B. McEvoy [members of the Newfoundland delegation].

Photo: National Archives of Canada/PA-128072.

Costco, seal capsules and Danny's latest folly

Danny Williams is in a lather because Costco reportedly pulled his old buddy Bill Barry's seal oil capsules from its shelves.

Williams issued a news release today on the whole thing, including announcing that his fish minister Tom Rideout (left) will be off to do battle directly with the retail giant.

Wags will recall that during his deficit fight shortly after taking office, Danny Williams referred to a financial analysis having been prepared by PriceClubWaterhouseCoopers.

I kid you not.

Anyway, through the wonders of google searching it turns out this is not the first time Costco has done this.

Click www.seashepherd.org and find an announcement from April 12, 2004 on the Sea Shepherd Conservation Society website announcing seal oil capsules were being pulled from Costco shelves.

Then click www.veg.ca and an announcement from September 1999 that Costco had pulled seal oil capsules from its shelves.

Meanwhile, the National Post carried Paul Watson's claim five days ago that he had succeeded in having seal oil capsules pulled from Costco shelves. He just didn't say if it was in 1999 or 2004. Watson also didn't note that the effectiveness of his boycott was considerably less than claimed, as reported here by local media.

In any event, Danny and his crew need to read their daily media clips, speed up their office admin processes or maybe search the Internet.

Danny Williams might well be tilting at anti-seal hunt windmills just as effectively as he did when he got a guest shot on Larry King Live. Of course, more and more people are regarding that whole sad episode as a set-up in which the Premier was basically suckered into appearing as a pawn in the anti-sealers' fundraising campaign.

This time the Premier will be sending his stunt double, at least.

Multi-billion dollar oil project in slings but...

Danny Williams has time to issue a lengthy news release condemning Costco for delisting a local product, namely Omega-3 capsules containing seal oil.

Love the seal hunt. Hate it. That doesn't matter.

Consider the implications of this demonstration of Danny Williams' priorities.

"I find it incredible that an international company of Costco's reputation would make such a serious decision without giving us the courtesy of hearing our views, or those of the industry," the Premier said. "I urge the company to reconsider this decision that has such serious implications for the sealing industry and the communities and individuals who depend on it, or at least put the decision on pause until we have an opportunity to inform them about the seal fishery."

I find it incredible Danny is stating that he finds this incredible.

But wait.

Danny's comms people will highlight this as an example of Danny's ongoing efforts to stand up for Newfoundland and Labrador and promote the province. They'll tell you this also fits with the new communications strategy (backed by $100K of new tax dollars) Danny will implement to defend the seal hunt.

But wait again.

Turns out the seal oil capsules Costco pulled from its shelves are manufactured by the Barry Group. For those of you who don't know, Bill Barry (left) is an old friend of Danny's. The Barry Group is the same company that got millions of dollars in loan guarantees last August to support its aquaculture operations in the province. It's also the company that has floated a possible commitment to buy the fishplant in Harbour Breton. The commitment is possible because it hinges on a fish quota which Barry doesn't have and in fact hasn't even applied for yet.

Considering all that, one can easily conclude that the Premier had more reason to get involved in this issue than just to stick up for the poor downtrodden Newfoundlanders and their annual seal hunt. One of the guys Danny really likes is involved and that probably makes it a bit more important.

Having gotten this far in our little exploration of the Premier's big news release, you might be interested to see that on the anti-seal hunt site maintained by Paul Watson's Sea Shepherd Conservation Society , the Barry Group is identified as one of the largest seal processors.

The site is promoting the anti-Canada boycott the Humane Society of the United States has been reminding us of in radio ads lately. Supposedly the boycott is costing us hundreds of millions of dollars annually. There's even mention that two of Barry's big customers for other ocean products are Red Lobster and Long John Silvers, encouraging people to hurt all of Bill's business to stop the seal hunt.

Now all of this put together and the news release starts to make more sense.

Go back to the release though and you'll notice that not once is mention made of the fact that the seal oil capsules in question are produced by Bill Barry's company. I wonder why.

What you will find, though, is a Canadian first minister calling for a boycott of companies that don't support Newfoundland and Labrador.

This isn't like fighting apartheid and it damn well doesn't make any sense to fight a boycott with another boycott. Like most boycotts the one organized by the anti-sealing crew is largely ineffective anyway. It's just another theatrical device to rally the hordes to give more cash to keep up the fight against the seal hunt.

Now Danny Williams wants to use a tactic against a pack of loons that the pack of loons is using against a local industry, and Danny wants to spend taxpayer cash to do it.

Oh yeah.

That makes a lot of sense.

But if we are going to do it, maybe Bill Barry could throw a couple of hundred thousand bucks into the kitty as well. After all, it seems like the Premier is doing as much work for Bill on this file so far as he is for the guys who actually go out risking their lives to harvest the seals in the first place.